Interest rates, as the cost of capital for sovereign and corporate entities, are inherently cyclical and therefore driven by macro-economic phases. As such, any assessment of value and risk is firmly anchored within a macro-economic context.
Long-term economic objectives centre on employment and wealth creation, which are influenced by monetary and fiscal policies in a bid to balance growth and inflation.
Given our fundamental belief that fixed income processes, by nature, are bounded due to the interaction of policy rates and inflation, qualitative (macro-economic) and quantitative (macro-quants) research and modelling are inseparable. Our quantitative models are based on the principle of cyclicality, employing a mean-reversion framework.
We deem it impossible and imprudent to manage assets for a single specific outcome, based on a point forecast. Rather, we believe in the value of scenario analysis, not only as part of portfolio optimisation, but also as part of our risk management process. We maintain that sustained long-term outperformance is about managing and limiting the downside risk in a portfolio.
A macro philosophy leads to low correlation with broader market and lower volatility.
In-house relative value models are used to screen for opportunities to best implement allocation strategies within each asset class.
We don’t rely on credit to generate returns. We focus on alpha in active asset allocation, and are less exposed to correlation, liquidity, issuer, default, market, systems and exchange risks.
